Budget 2012 - Analysis

The 2012 Budget is neither populist nor-agresseive nor reformist. Its impact on growth is expected to be limited. Increase in Excise duty and Service Tax by 2% will impact inflation. The Finance Minister has also stated that Crude prices are likely to touch $ 150 . Price increase in fuel prices is on the cards and add to inflation. Tax reabates given by increasing basic limit from Rs 1.80 lacs to Rs 2.00 lacs and the 20% slab from Rs 8.00 lacs to Rs 10.00 lacs is expected to save taxes in the hands of the public to the tune of Rs 4500.00 crs. Where as tax mop-up by way of increase in Excise Duty and Service tax is Rs 45000.00 crs. This implies that that we do not save money , but the common man will infact be paying Rs 45000 crs to the Governmennt.

1. Hike in Duty will make Gold costly.

Increase in customs duty on gold imports, this being a negative move for physical gold demand. But in case of silver, branded jewelry was exempted from excise duty, thus providing a relief to silver retailers.

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The move to increase custom duty on gold imports from 2% to 4% would help to contain the current account deficit which has ballooned over the past few years. Due to this, we expect traditional and physical jewelry demand to witness slowdown and therefore physical demand for gold could take a hit.

2. Senior Citizens have been neglectedPensions and Interest income will buy less than before due to fall in rupee buying power . No tax rebates has been provided for them. However Age limit has been reduced to 60 yrs (prviously 65 yrs). This will extend benifit of present tax benifits to the Senior Citizens between 60-65 yrs .

3. Interest Rebate of 1% on housing loans The extension of the 1% interest subvention scheme for affordable housing for another year will further benefit buyers for houses worth up to Rs 25 lakhs4. No concrete steps toward inflation management

5. Economy still not insulated from shock of global price increase in commodities and crude oil.6.Affordble Housing possible ? We will issue tax free bonds in the coming fiscal year. The cost of funds will be relatively lower. It will be one of our fund raising sources. This Budget has spelled out some incentives for affordable housing," "We will lend this fund to HFCs and banks to extend credit to home loan borrowers upto Rs 10-15 lakh In the Union Budget 2012-13, the Finance Minister, under a special dispensation, has doubled the limit of tax-free infrastrcture bond issues from Rs 30,000 crore to Rs 60,000 crore. This is only a statement on paper - Affordable houses will still be in the dream zone !!7. Deficit Budget is slowing increasing. Are we heading the Greek Way?

Up until 2008, our deficit was 20 percent of our revenues, i.e. if revenues were Rs 100, expenditure was Rs 120.

In FY09 (2008-09), apparently because of the global crisis, but equally because the UPA wanted to come back to power, our expenditure was 61 percent more than our revenues. In FY10 it dropped to 47 percent more than our revenues. In FY11 our expenditure was 46 percent more than our revenues, despite revenues getting a boost from the sale of spectrum. In FY12, we have spent a huge 65 percent more than our revenues. And in FY13, supposedly after serious efforts to curb the deficit, our expenditure is budgeted to be 52 percent more than our revenues. Deficit budget is not only inflationary but also empties the Govt coffers !!!What is becoming clear is that like some compulsive, spendthrift borrowers, the Indian government is unable to control its expenses or raise revenues. Until recently growth or perceived growth was tenuously bridging the gap between revenues and expenses. But now that growth is under serious threat. 8. Buy a House and become a un-paid Tax Collector for Govt !!!!

The Finance Minister in his Union Budget speech on Friday proposed the imposition of TDS (tax deducted at source) on the transfer of immovable properties (other than agriculture land) at the rate of 1 percent for deals worth more thanRs 50 lakh in urban areas and Rs 20 lakh in other areas.The change is expected to be implemented from 1 October, 2012. As per the proposed plan, the buyer has to deposit 1 percent of the sale value as TDS. "it is proposed to insert a new provision to provide that every transferee, at the time of making payments or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land) shall deduct tax at the rate of 1 percent", according to the budget memorandum. If you fail to deduct and pay - well you have to pay it from your pocket !!! How is that ????

9. Invest Rs 50,000 in Share Market - Tax Carrot !!!

Individuals parking money in banks, PPFs and mutual funds are being lured into the stock market with a tax carrot. New investors with income below Rs 10 lakh can buy stocks up to Rs 50,000 and hold for three years to save a little tax, according to the proposed Rajiv Gandhi Equity Savings Scheme.

The scheme is intended to promote equity culture, lower volatility and over time improve corporate governance. It's also the first time that the government will offer a tax benefit for direct stock investment.

10. $ 8 Billion from Tetecoms Spectrum Auction???

The finance ministry has projected revenue of Rs 40,000 crore from upcoming auctions of mobile radio spectrum during the year to March 2013, the annual budget presented in parliament on Friday showed.

India will auction 2G mobile radio spectrum after the Supreme Court last month ordered cancellation of all 122 telecoms licences and bundled 2G radio spectrum awarded in a scandal-tainted 2008 sale and asked the government to redistribute them through an open auction.

The government is also planning to auction 4G broadband spectrum after state-run telecom Bharat Sanchar Nigam Ltd offered to return wireless broadband spectrum in several telecoms zones. There is also a plan to auction 4G spectrum in the 700 mega hertz band.

11. Interst on PF cut to 8.5% More cuts expected !!!

12.Every thing in your Living Room just got costlier !!!

Get ready to pay more for a whole host of consumer durables - from air conditioners and washing machines to microwave ovens to cameras. Finance MinisterPranab Mukherjee proposed a hike in excise duty to 12 percent from 10 percent. It will prompt an increase in product prices from manufacturers, already hit by high input costs.13 Deduction on Ifra bonds of Rs 20,000 U/s 80 C is no-longer available.Two years ago there was an additional deduction introduced to encourage investors to put money into infrastructure bonds. This consisted of bonds with a 5 year lock in and the maximum benefit for the year was restricted to Rs 20,000 of investments. Devil in the detail

The manner in which this section was structured was that this was applicable initial for just one financial year and this was later extended for one more financial year which meant that the benefit was available for the financial year 2010-11 and 2011-12. Now there is no mention in either the explanatory statement to the budget or in the part of the budget that makes the changes to the income tax act about any change in this particular section. What this actually means is that the term of the section has not been extended and that it will end at the end of March 2012.

IMPACT ON SPIRITUALISTSIt is our Karma that we are burdened with more and more taxes every year . Only way out is pay taxes and meditate peacefully so that the Taxman does not come knocking on the door and disturbs the peace. And if refund is due against TDS, Well the world is not going to end soon - we can wait and wait !!!